GST: From the federal tax structure to return filing simplification – many miles to go

Published: January 24, 2019 12:29:57 AM

States are developing alternate mechanism to increase their tax base by levy of local body entertainment tax or similar local body taxes. Also, state-specific incentives have been announced via state industrial policies, which are bound to create disparity in the national market.

gst, gst tax, gst india, gst filingGST: Many miles to go

By Mekhla Anand & Abhilasha Singh

The Goods and Services Tax (GST) legislation was introduced with a big bang in July 2017. Any criticism regarding the lack of readiness of systems/assessees and the anxiety of transition was countered with analogies referencing various facets of an Indian wedding. It was decreed that order would ultimately prevail over the chaos, and India would witness a magnificent celebration of another generation of financial reforms.

Needless to state, the initial transition has been fraught with conflict on issues ranging from failure of the GST portal to handle the transactions, management of multiple state-level registrations and their consequential compliance requirements, invoice matching etc. Indeed, 2018 stood out as the year where, with the ceremonial fervour finally out of the way, issues in the finer print began to emerge.

Loss of input tax credit due to the manner in which transitional provisions are structured, whether basis the nature of items involved, the arbitrary limitation period specified, ineligible credit for erstwhile cesses, lack of foresight for those availing location based incentives prior to GST, has set the stage for the next round of litigation. Similarly, while recourse to the Authority of Advance Ruling has been the flavour of the season, the government clearly discounted the possibility of divergent views by different state authorities, something that has been evident in recent GST Council deliberations.

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The anti-profiteering provisions are yet another example of antipathy, given the lack of clarity on the methodology for computing the benefit to be passed on to the recipients. Basic harmonisation of legislations which link into GST such as the Foreign Trade Policy or the Customs Act are also a long way from the desired end.

For a system which was required to simplify, stabilise and bring down the level of discord, the GST experience has been quite capricious.

GST was visualised as a regime of reduced compliances and minimal physical interaction with the authorities; the e-way bill continues to result in unnecessary stalling/seizure of goods and harassment at the hands of the authorities due to minor technicalities and breaches. While the banking sector was still grappling with its transactional reporting requirements, the e- commerce sector now faces the challenge of the Tax Collected at Source (TCS) provisions,
The GST regime regrettably is also falling prey to the federal mechanism of our Constitution as states are developing alternate mechanism to increase their tax base by levy of local body entertainment tax or similar local body taxes. On the other hand, state-specific incentives have been announced through state industrial policies, which are bound to create disparity in the national market.

Perhaps what is most concerning in the present is that there is still no roadmap for a GST 2.0 which would resolve fundamental concerns such as the simplification of returns, e-wallet payment options, inclusion of petroleum products within the ambit of GST, rationalisation of refund processes for exporters and unutilised input tax credit to due inverted duty structure. Till these issues are resolved, ‘happily ever after’ remains a distant goal.

With inputs from Rupa Roy, associate, Cyril Amarchand Mangaldas

Anand is partner and Singh is senior associate, Cyril Amarchand Mangaldas

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